Goldmoney is still an undervalued stock, Mackie research says

Shares of Goldmoney (TSX:XAU) began a torrid run this past summer, but Mackie Research Capital analyst Nikhil Thadani thinks there is still money to be made on the stock.

On Thursday, Goldmoney announced it would partner with China’s second-largest gold mining company, Zhaojin Mininglaunch, to launch and operate a Chinese version of its platform.

“I have great admiration and respect for China; its people, its culture of excellence and its deep-rooted passion for gold,” said CEO Roy Sebag. “For two years, we have reflected on what we needed to see in order to launch and expand our service in this important market. Of all the Chinese joint-venture business cases I have studied, the most successful have been those where a local partner manages the client-facing operation while the parent company establishes the standards and expertise from a centralized location. We are excited to be partnering with a strong group that is also a state-owned enterprise providing us with the regulatory confidence to invest our capital and build real connections,” continued Mr. Sebag. “I have personally had prior success investing in Chinese internet ventures and have seen first hand how quickly these operations can scale when they are well intended. I can now confidently say that we are for the first time launching correctly in China with a well-intended and long-term vision. I believe that if we are successful, within a few years Goldmoney China may be bigger than all the rest of our operations combined.”

Thadani says he views this as a positive development.

“XAU’s current ~1.4 mln large user-base could see meaningful growth as well as transaction based revenue growth if XAU China gains traction,” the analyst says. “China is acknowledged as the world’s top consumer, producer and importer of gold. XAU could become an interesting vehicle to gain China Fintech exposure. China has recently halted all approvals for new online lending companies, sending a chill through the country’s fast-growing fintech sector, per the Financial Times. At the same time, the publication points out that “Investors have shown strong interest in Fintech despite Beijing’s regulation of the sector, with some of the most valuable IPOs in New York and Hong Kong this year driven by Chinese Fintech”. For example, in October, Robert McCooey, Nasdaq Asia Pacific chairman, said Nasdaq IPOs from China were on track to double this year compared with last year, driven by Fintech offerings. XAU’s previously telegraphed NYSE listing (could take place in a couple months) could bring new US investors to the stock seeking China Fintech exposure.”

In a research update to clients Thursday, Thadani maintained his “Speculative Buy” rating and one-year price target of $8.25 on Goldmoney, implying a return of 31 per cent at the time of publication.

Thadani thinks Goldmoney will generate EBITDA of negative $5.27-million on revenue of $509.9-million in fiscal 2018. He expects those numbers will improve to EBITDA of negative $7.02-million on a topline of $632.9-million the following year.